To check the sector size for an attached drive before allocating it to backup in an elevated command prompt type:

fsutil fsinfo ntfsinfo x:

where x: is your drive letter.

Please add your successes and failures using inbuilt SBS(NTBACKUP) / Windows Server Backup. Please remember to test Backup and Restore functionality and state part number and capacity of drive tested along with server USB interface level
(2 or 3) tested.

Update

We have been looking into this issue and we believe the limitation comes from VHD (Windows Backup Creates a VHD as it's storage method) only support 512, not the drive it self. Microsoft Need to update Windows Backup/Windows 2008, Windows 2008 to support
VHDX files then this issue would go away.

Note that Microsoft recommend drives are reformatted as NTFS before being used with Windows Server Backup (WSB). Large drives (eg 3TB+) should be reformatted with 512 bytes per cluster as large drives tend to be factory formatted with 4096 bytes per cluster which
can cause problems with WSB.

Thank you to Merv Porter, SBS-MVP, for writing up the following workaround for USB backup drives that fail to wake from sleep! - Steve

Workaround for External USB Backup Drive not waking from sleep

SBS 2008 administrators may notice that certain makes/models of external USB drives may go to sleep during periods of inactivity resulting in failed backups. One workaround for this utilizes Microsoft’s Devcon utility with scheduled tasks to first remove
the USB device and then to rescan the USB bus. Unfortunately, the original 32-bit version of Devcon does not function properly on a Windows 2008 system. However, the Windows Driver Kit (Version 7.1.0) contains a Windows 2008 compatible version.

Right click on the iso and select “UniExtract to Subdir” (this will create a subfolder called ‘GRMWDK_EN_7600_1’)

Now navigate to the \GRMWDK_EN_7600_1\WDK folder

Scroll down and right. click on ‘setuptools_x64fre.msi’ (the extension may be hidden)

Select “UniExtract to Subdir”and click OK on the MSI Installer Extraction warning to select the MSI Administrative Installer method. (this will create a subfolder called ‘setuptools_x64fre’)

Open the ‘setuptools_x64fre’ subfolder and navigate to:

\WinDDK\7600.16385.win7_wdk.100208-1538\tools\devcon\amd64

Copy the Devcon.exe utility to a flash drive

Back
at the SBS 2008 server

log on as a domain administrator and copy the Devcon utility to a convenient place (like the root of the C: drive) and then create two Scheduled Basic Tasks…

Name: Devcon Remove USB before backup

Program: devcon.exe

Schedule: (10 minutes before backup)

Arguments: remove usbstor*

Start in: c:\

Name: Devcon Rescan USB Bus before backup

Program: devcon.exe

Schedule: (5 minutes before backup)

Arguments: rescan

Start in: c:\

Other parameters to include in each scheduled task…

Run with highest privileges

Wake computer if necessary (Note: not sure if this one is actually necessary)

Run even if user is not logged on

Note

You may see the following critical errors in the event log after implementing the Devcon tasks. (It is believed that these can be ignored):

Event ID 16: The shadow copies of volume \\?...340-11df-a3e5-001b217ab973} were aborted because volume \\?...340-11df-a3e5-001b217ab973}, which contains shadow copy storage for this shadow copy, was force dismounted.

Event ID 137: The default transaction resource manager on volume \\?\Volume{921672f3-f340-11df-a3e5-001b217ab973} encountered a non-retryable error and could not start. The data contains the error code.